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No. 35 of 2016

FRIDAY, JUNE 10, 2016

Filed from Portland, Oregon

Click here for Wednesday's quote from Philip Houlding of New Zealand.

PORK, TPP AND, AND THE RIGHT QUESTION

"The ITC report is well and good, but [TPP is] really about, Are we going to be left behind? That's the issue here."

Nick Giordano
May 20, 2016

CONTEXT

Nick Giordano is Vice President and Counsel at the National Pork Producers Council, and he was the first speaker on the business panel at GBD's May 20 conference on Pacific Arrangements. Joanne Thornton, the panel moderator, described Mr. Giordano as "one of this town's [Washington's] most animated and effective advocates for trade expansion."

As was to be expected, Mr. Giordano talked about pork production in America, about exports - the American produced pork that is sold to foreign buyers - and about the importance of the Trans-Pacific Partnership Agreement to his members. We will turn to those shortly. It is worth reflecting first, however, on his comments about the ITC report. He is, of course, correct that the report issued by the International Trade Commission on May 18 does not really address the question: What are the likely consequences of an American failure to ratify and implement TPP? The title of the report makes that clear. It is:

Trans-Pacific Partnership Agreement: Likely Impact on the U.S. Economy and on Specific Sectors.

Essentially, the Commission compared the likely effects of TPP to a baseline projection for a world in which TPP had never been negotiated. Mr. Giordano's point is that, in the real world, TPP has been negotiated. The real alternative to a U.S. ratification of TPP is not an imaginary world in which the exercise had never been undertaken but one in which the U.S. has deliberately spurned what many regard as its own creation.

That may be a shortcoming, but it is not one for which the Commission can be faulted. The report the Commission prepared is precisely the report mandated by law - the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 - and the one requested by U.S. Trade Representative Michael Froman in his November 5, 2015, letter to ITC Chairman Meredith Broadbent. And indeed the report the Commission published is an extremely useful and impressive document. We expect to return to it over and over in the coming months. It does not, however, address the question Mr. Giordano focused on.

About American Pork and Pork Producers. As Mr. Giordano explained, the National Pork Producers Council is an association of 43 state pork producers organizations, representing some 68,000 producers. Here are some more of the numbers he shared:

Pork production writ large accounts for an estimated $39 billion of U.S. GDP;
All told, the pork industry supports nearly 550,000, mostly rural jobs in the United States; and

"U.S. pork producers provide 25 billion pounds of safe, wholesome and nutritious meat protein to consumers worldwide.

U.S. Pork Producers and Trade. "On average, in the past ten years, the United States has been the number one pork global exporter," Mr. Giordano said, adding that the roughly $6 billion a year in export sales account for about one-quarter of U.S. pork production. Trade agreements have been a big part of America's export success in pork. "The majority of our exports," Mr. Giordano said, "go to our 20 FTA partners."

"TPP is going to be good for agriculture," he said, and it is going to be good for U.S. pork producers. Underscoring that point, Mr. Giordano cited the assessment of TPP by agricultural economist Dr. Dermot Hayes of Iowa State University. Dr. Hayes has called TPP the greatest economic opportunity every presented to U.S. pork producers. Among other benefits, Dr. Hayes believes TPP would add some 10,000 new U.S. jobs as a result of increased pork exports.

The ITC report is helpful here, noting as it does that "TPP would improve tariff treatment for U.S. pork exports to Japan, Malaysia, New Zealand, and Vietnam." (page 158). In discussing the situation in Japan, the report said that "Japan's increased pork imports from the United States would largely displace imports from the EU, plus some Japanese domestic production." (page 157)

Here we come back to today's featured quote, which Mr. Giordano amplified when he said:

"Again, what's missing from the ITC analysis and most other assessments, though, is the impact on the U.S. economy of failing to pass TPP this year. As the United States contemplates a timeout on trade, the rest of the world will move forward. Japan and the EU are nearing completion on a free-trade agreement. The EU has a keen interest in exporting its food and agricultural products, including pork, to Japan and paying a lower tariff than would be imposed on U.S. products."

That's the scenario that American pork producers are looking at - a loss of sales if TPP fails in Congress and others move ahead with other deals, such as the EU-Japan FTA.

COMMENT

"I shall return" may be Douglas MacArthur's most famous line. For us, the most instructive is "There is no security on this earth; there is only opportunity." TPP is an opportunity for America, and the arguments against it seem animated, for the most part, by the false hope of a false security. They could prevail. If they do, it wouldn't be the first time America has turned inward in the name of security.

As trade professionals often do, Mr. Giordano talked about the Tariff Act of 1930 - the law that gave us the punishingly high Smoot-Hawley tariffs - but his was a review with a twist. Here is what he said:

"After the stock market crash of 1929, Congress voted the following year to impose high tariffs on imports to save jobs. Oops. The result was an immediate jump in unemployment from around 6 percent to 14 percent in three months, then, to almost 30 percent in another 18 months. Yeah. You heard that right. Nearly a year after the stock market crash [October 29, 1929], the unemployment rate was still just 6 percent. That is, until the ill-advised Smoot-Hawley Tariff Act was enacted [June 17, 1930].

"I'm a Yankee fan. As Yogi Berra once said, 'If you don't know where you're going, you might wind up someplace else." We need TPP. We need Congress to pass TPP this year, 'cause we don't want to end up someplace else."

SOURCES & LINKS

The Business Panel is a reference to the audio tape of the panel with business speakers at the GBD May 20 conference on Pacific Arrangements. Nick Giordano was one of those speakers and the referenced audio tape is the source for today's quote. While this recording has not yet been posted on line, it is available to GBD members on request.

The ITC Report is a link to the text of the Congressional mandated report, which was released on May 18, 2016.

The Request Letter is the text of Ambassador Froman's letter to ITC Chairman Meredith Broadbent of June 5, 2016.

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